Otay still believes in Rosarito water project

The venture’s lead partner is pulling out

The Otay Water District’s general manager said the water district is still committed to a proposed desalination plant in Mexico, even if the current partnership steering the project falls apart.

Mark Watton informed the board of directors of the continuing commitment at a special board meeting on Wednesday, less than a month after one of the partners in the proposed plant announced plans to pull out.

“I said to the board that I have a firm belief in the project,” Watton said, “that the project developer (NSC Agua) has made some substantial progress over that last couple years on the project. The deal project is very important to the regional water supply, enough so that in some fashion NSC Agua or a successor entity will move the project forward.”

Consolidated Water, a publicly traded utilities company based in the Cayman Islands, is the leading partner in NSC Agua, the venture partnership behind the Rosarito Beach project. Rick McTaggart, president of Consolidated, is the chairman of NSC Agua. The other half of the partnership is a Mexico-based group of investors called Norte Sur Agua.

Consolidated Water said in its quarterly filings with the Securities and Exchange Commission in November that it was giving an unnamed third party related to one of the Norte Sur Partners until Nov. 21 to buy its shares.

“The option was not exercised,” McTaggart wrote in an email this week. “We are currently evaluating alternative courses of action, as discussed in our (quarterly filing).”

Those alternatives include finding another party to buy its shares, restructuring NSC Agua or ceasing the partnership altogether. McTaggart did not give a time frame for when Consolidated would make a decision on its next step.

Consolidated cited a lack of funding and uncertainty surrounding the project as a roadblock to its continuance in the project, but McTaggart would not elaborate on what that uncertainty is.

Mexican water officials were also skeptical of the project. One official with the National Water Commission told the U-T last month that the agency did not believe the project was feasible.

One of Norte Sur’s partners, however, said the group of investors will move the project forward, with or without Consolidated.

“We’ve made a substantial investment over the past few years,” said the partner, Gough Thompson, a Rancho Santa Fe resident and a former consultant who advised large corporations such as Hyundai in the Middle East on desalination efforts. “Consolidated pulling out is not a deal-breaker.”

Otay officials are hoping that this is the case.

The county’s largest independent water district has pinned its water hopes — and resources — on the proposed $500 million plant. It shelved two other less ambitious projects earlier this year, awarded a $4 million contract for an engineering firm to study the project and spent $674,000 on consultants and lobbyists.

In recent months, the district has slowed down its studies until the project moved further along. Watton said Wednesday that the district would “throttle down” even further until NSC Agua resolves its ownership issues, including asking one of its contract lobbyists to limit efforts on the desalination project.

“Given that the situation is in flux, it would be prudent for us to wait and see what happens,” Watton said. “We will still continue to gather intelligence about Mexico’s water situation.”

At least one board member expressed concern about the state of the project.

Mark Robak said that he was worried that Consolidated’s withdrawal signaled that the project would not be able to overcome the hurdles it faces. Robak added that he was skeptical that funding would be the reason for the pullout because all of the parties knew that the project would be expensive.

“I find it all very curious, because if these parties are all as well off and have the experience as being represented, why would there be reluctance to put up more money?” Robak said. “I’m concerned, no question. Is there a fatal flaw, or something that they know that is keeping them from moving forward? No one has answered those questions.”

Watton said he believed that it is typical for businessmen to re-evaluate their investment when it reaches a certain point.